Some economists have argued that development must be driven by the people from bottom up and that people must participate in the process of development. One of our greatest economists, the late G.V.S de Silva who started out as a Marxist economist wrote about the importance of peoples’ participation towards the end of his career where he served in Bangkok. He even set up the Participatory Institute here to try out ways to promote peoples participation.

Organizations like the Sarvoday are today engaged in such work and their contribution to development is not adequately appreciated.  Peoples’ participation implies the active involvement in development of the rural people and their involvement in the development process. The World Conference on Agrarian Reform and Rural Development (WCARRD) in 1979 affirmed that "participation by the people in the institutions and systems which govern their lives is a basic human right and also essential for realignment of political power in favor of disadvantaged groups and for social and economic development". Peoples’ participation is also recognized as an essential element in strategies for sustainable agriculture, since the rural environment can only be protected with the active collaboration of the local population.

Many economists in the Third World placed their faith in the State to spearhead development owing to the lack of a strong private sector and the lack of entrepreneurial qualities in a conservative society where emphasis was traditionally on book learning and learning by rote which are hardly conducive to promote creativity or originality. So the State has been playing a dominant role in our development process and often the private sector is facing the crowding out effect on investment and the pre-emption of resources of the private sector by the State owing to its deficit budgeting and money printing. In fact the stage has been reached now that government activities are a serious drag on the private sector.

It would not have mattered if the public sector was productive. But it is politics, not market forces, that drive the State sector. There is also what economists call the Principal-Agent problem where the true owners - the public are largely divorced from the management of the public sector corporations and there is no way to align the motives of those running these corporations with the best interests of the owners- the public. The Public Choice School of Economists have shown that the idea that the politicians act in the public interest is a myth. They act in the public interest only where their private interests coincide with that of the public interest. The democratic state seeks to limit the power of those who exercise power in the State. But this requires the observance of checks and balances and independent institutions like a politically neutral bureaucracy and an independent judiciary

State Power can be exercised to create a one-party state

The essential sine qua non for a democratic opposition can be removed by a ruling party using the resources and the machinery of the state to win elections for itself. Poor Ranil is blamed for a situation which makes it impossible for the Opposition to come to power except through popular unrest and insurrection as in the former Communist one party states. But let us confine ourselves to the adverse effects of big government funded by following deficit finance.

Within the State structures we are following the bureaucratic model rather than allowing for peoples’ participation. There is also the dependency culture driven into the people by well meaning but foolish policy makers that has crippled the peoples’ initiative. Whatever initiatives the people displayed in the past through the co-operative movement have been over-ridden by the control exercised by MPs. Members of Parliament are expected to be engaged in law making and monitoring the public service and the executive but instead, after 1956, they  involved themselves in the day to day operations of the bureaucracy. The bureaucracy was once able to run day to day operations on a politically neutral basis but not any more. They have been reduced to the status of serfs obeying without question every dictate of the ruling politician whether it is legal or otherwise, fair or unfair, honest or corrupt. So the institutions of democracy have become mere appendages of the Executive. From an administrative point of view there is no possibility of having either a two party democracy or productive economic development.

The State led development may also soon lead to a situation where development is stifled by the lack of funds for the State unless a friendly country like China bails us out continuously as it does North Korea. Pressed by a lack of resources, deteriorating terms of trade and mounting external debt repayments, the state driven bureaucratic mode of development may not be sustainable.

In any case it has not led to an improvement of living standards of the majority of the people. True that GDP per capita has doubled as the President likes to point out. He is talking of the GDP per capita in money terms, the nominal GDP. But what is relevant is the Real GDP. This nominal figure can be increased by higher inflation and a lower rupee/ dollar exchange rate. Be that as it may, the fact is that 45% of the people earn less than $2 per day and what is $2 or Rs 230 per day for a person? The measurement of poverty on the basis of a dollar a day income fixed by the World Bank in the mid nineties is no longer an adequate poverty measurement. Not even $2 per day is sufficient given the high inflation in the country.

The neo-classical growth model with free markets and private sector investment assumes that economic growth trickles down to the poor. But it takes a very long time to reach the lowest segments of the population. So we find that despite high growth rates and massive state investment, the rural economy has not benefited. The State funded welfare services like free education and free health care have deteriorated in the quality of their services. Inflation reduces the real value of the Samurdhi benefits. Inflation pauperizes the low income earners and fixed income earners.

If the rural economy is to benefit, the people must be motivated to participate in the process of development. Minister Basil Rajapakse recently referred on TV to the dependent mentality of our people who expected the State to provide everything for them including pots and pans. True indeed but who created this dependency culture and how do we change it?

Over the past two decades, many governments, development agencies and non-governmental organizations have recognized that the "top-down" approach characteristic of traditional development strategies has largely failed to reach and benefit the rural poor. The other day I was reading in the Lakbima the proceedings of the Pradeshiya Sabha of Siyambalanduwa. One member referred to a bridge in Hiripitiya village which has collapsed because excessive loads were taken over it by the villagers. He pointed out that the repair and reconstruction had to be done by the central government and that the authorities are not taking action.

Would it not be better to entrust the funds directly to the Pradeshiya Sabha for this sort of village work? True, they do not have the engineering skills but the central government also gives the work on contract and the Pradeshiya Sabha could do likewise and obtain supervisory services of a higher tier of government. Someone will say that the local politicians are corrupt. But are the central government politicians and the officials not corrupt as well? The remedy for the ills of democracy said De Tocqueville is more democracy not less.

If the local politicians are responsible to the people it will be harder for them to hide their corrupt actions from the people. Local level projects are best monitored at the local level by the local level democratic institution. Of course the larger works that provide a better cost:benefit ratio to a larger population would require a higher tier of popular democracy like a Provincial Council.

 The entire ethic problem is in my opinion due to the undermining of the politically neutral bureaucracy and its replacement with politically driven development in the provincial and local level. After 1956 SLFP politicians intervened directly in the administration. More and more officers from the Government Agent downwards had to act in terms of what pleased the local Member of Parliament rather than to use his best judgment. There was much resistance particularly by the old Civil Service which led to its abolition in the name of socialism.

But imagine the position of the Tamil MPs in dealing with the district administration. As a former Government Agent I could afford to ignore the requests and undue influences (in my opinion) which the local Tamil MP brought upon me as they were not in the ruling party and had no free access to appeal against my decisions to the minister.   But why should my judgment prevail over that of the MP when in the rest of the country it was the reverse.

Isn’t devolution of power to the Provincial Council not the answer to this problem? Decentralization will not do because in the Sinhalese areas it is the local politicians that rule and Tamil MPs want a similar situation in their areas.  The system of course is chaotic and along with the abolition of the PSC has already led to the collapse of the civil administration. The situation however is ideal for bribery and corruption to flourish.